All posts tagged Trading Irregularities

Today’s trading irregularities, or error, or snafu, or whatever cutesy term this one ends up getting tagged with, is not the first mistake of its kind in the computerized, high-frequency world of the stock market.

The 2010 flash crash is the most notorious example, but it isn’t the only one, and indeed, these kinds of errors seem like they may just become a fact of life for traders and investors, like a traffic jam for commuters,

Here are some of the most notorious examples of computer-driven snafus. Welcome to the new stock market. Mind the gaps.

The Flash Crash obviously the most notorious example of computerized trading run amuk. On the afternoon of May 7, 2010, stocks started dropping, fast. The DJIA fell nearly 1,000 points in a matter of minutes. It recovered most of the losses, but still closed down about 300 points. Rather than being the result of a specific error or system breakdown, the crash seemed to just be an extreme example of how high-frequency trading can affect the market. The definitive explanation for what happened that day hasn’t yet come.

BATS IPO BATS had built an all-electronic exchange that over several years became the market’s third-biggest exchange. When the company decided to go public, it proudly decided to list the IPO on its own exchange. But the move was a disaster. The company encountered myriad problems with its platform, with bids on BATS shares plunging to pennies within seconds of its first trades. The break-downs hit other stocks as well, most prominently Apple. BATS withdrew the IPO, and as of today remains a private company.

“We’re panicked,” about owning Herbalife, said Phil Orlando, chief equity strategist for Federated Investors in New York, which manages $370 billion. He was referring to the sharp fall in shares of Herbalife — a company that Federated holds in two funds. The stock fell more than 10% in early trading. “We’ve been calling Knight to find out what the [heck] they’re doing.”

Initial signs pointed to a rogue trading algorithm, traders said, though the origins of the swings were unclear about an hour into Wednesday’s session. NYSE Euronext said in a note to traders it was “reviewing trades in 148 symbols between 09:30:00 a.m. and 10:15:00 a.m. ET.”

Several traders have pointed to big stock moves on no news, including RadioShack, Quicksilver Resource, Magnum Hunter Resources and Dole Food, among others.

Some traders have pointed the finger at Knight Capital, a market making firm on the floor of the New York Stock Exchange, for the issues. A Knight Capital spokesperson said the firm is looking into stock-trading irregularities.

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